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Beware the price shopper!

Written on the 24 February 2012 by Macmillans Waller Fry - Accountants

Most businesses work on the basis that they are supposed to sell on value and not price.

What happens when a business is faced with the prospect of a priceonly buyer?

First, make sure they really are in fact a priceonly buyer. In most cases, salespeople are too quick to place a ‘price-only buyer’ label on their prospect’s forehead. It is stuck on before they dig deep enough into the prospect’s world to truly understand their business and their motivation to buy the cheapest. For example, a customer in the construction industry may be finding that they have a large number of tools ‘disappear’ on a worksite. They may be compelled to purchase cheaper tools in order to minimise losses. 

This may mean missing out on the increased performance of the higher quality tools that they may prefer. This does not necessarily make them a price shopper - just prudent in minimising a problem. Before making the assumption that a prospect is truly a price-only buyer, dig deeper. Once you have revealed their true reason and it is, truly, a price-only reason, be aware of how they can affect your work.

Here are the five ways a price shopper can harm a business:

  • They waste staff time. They tie salespeople up as they write different versions of proposals, provide different variations on solutions, and go back-and-forth with their decision too many times to count.
  • They waste company time. All of those proposals submitted and meetings you hosted involved people from other departments. Simply put, they stole time from the resources that could have been focused on securing more qualified prospects - prospects that would have been more willing to pay for the true value of your products or services. 
  • They are unforgiving. After jumping through hoops to get the order, they now scrutinise your every move. If the invoice is off by a few dollars, they want another discount. If the delivery is three minutes late…guess what they are asking for?
  • They damage your image. When your top customers (who pay a premium price for your premium offering) hear about the prices that a price-only buyer is paying, it can create doubt in your company’s quality and value.
  • They erode your margin. Price-only buyers have a higher cost of sale by eating up more of your internal resources, continually driving your price down and usually taking forever to pay.
  • Not all price shoppers are bad. Some can even benefit a business. Here is how they can damage your competitor:
  • Let your competitors have them. While your competition is doing back flips trying to keep them happy, you can be out closing business with profitable prospects.
  • They can provide you with competitive intelligence. The price buyer will often reveal your competitors’ pricing, product, and information (in some cases you might even get a complete proposal). They do this to play salespeople against each other. Be polite and let them deal with your competitors.
  • They can be used as a pricing gauge. If you discover that these price-only buyers are increasing their orders with you then it must be time to raise your price!

How is your pricing policy working for you? For a review of your policies and advice on how you can maximise profits from your sales, contact us today.


Author: Macmillans Waller Fry - Accountants
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